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The Path to Open Source: Venture Capitalism?

The impact of a venture capital investment in the decision to release the source code for Principia.

by Liz Coolbaugh, December 3rd, 1998 (original article)

The announcement that Digital Creations is releasing the source code for its flagship product, Principia, was made at the Python Conference last month and reported shortly thereafter in the Linux Weekly News. Since then, we've been following up with Paul Everitt at Digital Creations to find out how this decision came about and what the results would be. Many interesting tidbits have cropped up as a result. One that particularly interested us was the involvement of the venture capital firm, Verticality Investment Group, LLC (ViG), in the decision to release the source code for Principia.

ViG's investment in Digital Creations was announced on November 6th.

Shortly thereafter, the staff of Digital Creations got together to discuss unification of Principia and Bobo. At that time, Bobo was a free, open source web toolkit that gained rapid popularity as being "the one toolkit that did it right." Principia, a commercial product, is a mature and easy-to-use web application development platform that allows applications to be quickly constructed and managed through a web interface, without requiring any actual code. It includes a simple HTML interface, many pre-built web objects and an API for building additional web objects, making Principia "useful right out of the box". Digital Creations, a small, growing company, was finding it difficult to have two primary products. Bobo and Principia "required two separate messages to articulate, two different groups of customers to nurture, two documentation efforts, two engineering efforts, etc.", commented Paul Everitt. While Bobo was popular, the company focus was on Principia. It made sense to find ways to reduce duplication of effort.

Early discussion focused on creating a free, but closed source "plugin" of Principia to use with Bobo. In discussing the possibility with active members of their mailing lists, the idea was found to be confusing and failed to achieve the goal of unifying the Principia and Bobo products. The possibility of making Principia open source was first mentioned by Jim Fulton, CTO of Digital Creations. Paul tells of the mirth that evoked, "We all kind of laughed and got back to the important stuff -- bickering about the intellectual property value of the tree tag ..."

The Decision

Then Hadar Pedhazur, principal of ViG, the venture capitalist firm that had invested in Digital Creations, took a hand. With his background and experience, he sat down with Paul Everitt and staff and led them through the process of determining exactly what made their company valuable and how Principia fit into that process. Several quotes made in the announcement of ViG's investment clarify what value ViG saw when they chose to invest.

Digital Creations will use the funding to significantly grow its consulting business. The company's powerful Principia web application platform has been developed over the last two years and used in high scale, dynamic web sites for business applications. With this software architecture, Digital Creations brings a significant advantage in projects focused on time, value, and certainty of success.

This quote makes it easy to compare the decision to release the source code of Principia with the decision to release the source for the Netscape web browser. In both cases, the actual company revenues are then generated from vertical products and services that work with the flagship products.

Hadar Pedhazur summed up this perspective by stating,

Digital Creations will emerge as a significant force in the web application services market. Their architecture resonates with how the web is now integral to the global business community. Digital Creations is an aggressive, responsive company that owns transformative technology and is now moving into the larger arena of consulting.

The transformative technology mentioned is Principia. The value of Principia lies in its ability to attract and convince new customers that Digital Creations is the best consulting firm to implement their web solutions. The software's value is directly in-line with how well known the product is and how much of the market share it can capture. Going open source improves Principia's ability to do both of these. Paul Everitt commented, "How valuable is the killer app that no one knows about?"

Eventually a large number of reasons for taking Principia open source were found, including expanding the user base, improving and widening the brand identity, making the software rock solid, battle-tested, and bulletproof, fostering a community that can serve as an "army of messengers", and dramatically increasing the pace of innovation and responsiveness to new technical trends, such as XML and WebDAV.

The result was that Hadar Pedhazur, representing ViG, made the recommendation that the source code to Principia be released. Surprised at first, Paul Everitt and staff moved quickly forward to discuss the idea with Eric Raymond, discuss licensing issues and finally make their announcement at the Python conference. (More details are available in Paul Everitt's diary).

The results: Zope

The Z Object Publishing Environment, a.k.a. "Zope", is a free, open source web application platform that can be used for building high-performance, dynamic web sites. The new product is built on both Principia and Bobo, as well as Aqueduct, Digital Creations relational database integration software. The result is a strong development platform, in which you can build objects, design a structure and then allow Zope to provide access to your objects in a natural, elegant manner. Zope is well positioned to become the free, open source alternative to commercial products like Cold Fusion, Silverstream and Netscape Application Server. For more information on what Zope is, check out Zope's Question and Answer page.

During the days since the initial announcement, Paul Everitt has worked to get input on the planned license for Zope. A draft version of the license is now available for review and comment.

The license is open source, but it is not a GPL license and does not prevent the existing code from being integrated into a commercial product, though modifications to Zope must be distributed as patches. The emphasis of the license is on guaranteeing that Digital Creations receives attribution and credit for their work, obviously a critical issue if they want to use this platform to build their consulting business. In addition, they are providing the community with the ability to register their use of Zope. The registration information helps them demonstrate the width and breadth of Zope's customer base.

The web site for Zope is expected to be available this week and Zope 1.9beta, the first open source version of the Zope software, will be released on Friday, December 4th.

From here on out, Zope will rise or fall based on how well its open source compatible license is received in the community and how well it works for the people who give it a try. Its success or failure will in turn affect the viability of Digital Creations. If they and ViG have made the right choice, as we believe they have, the release of the Zope source code will have a dramatic impact on Digital Creations. In turn, it will serve as another example of the value of open source code to the business community. In the meantime, no matter what the outcome, the rest of us have gained an excellent tool that we can use, improve, share and know will continue to be around as long as we find it useful.

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